I am a fourth-year econ. Ph.D. candidate at the French National Institute for Research on Agriculture, Food, and the Environment (INRAE), under the direction of Olivier Allais (INRAE) and Céline Bonnet (TSE). My main interests lie in the fields of industrial organization and policy evaluation.
This paper investigates the implementation of the Soft Drinks Industry Levy (SDIL) in the United Kingdom, leveraging panel data from 2015 to 2018 to assess the policy's impacts. Introduced in April 2018, the SDIL is a targeted fiscal intervention designed to reduce sugar consumption through a price-based mechanism. Under the policy, beverages with sugar content exceeding 5g per 100ml are subject to an 18p per liter levy, with an additional 8p for products exceeding 8g, leaving part of the supply chain untouched by regulation. While prior research has examined the immediate effects of the SDIL on consumption patterns, pricing strategies, and product reformulation—highlighting significant reformulation efforts in the pre-implementation phase—this study advances the literature by adopting a structural approach. By integrating consumer panel data across pre- and post-implementation phases, this analysis disentangles the causal effects of the levy from broader market trends. Furthermore, the structural framework enables counterfactual simulations, allowing us to assess the policy’s potential impacts in a pre-policy environment and to explore optimal taxation designs.
Many countries have implemented fiscal policies to promote healthier diets. However, policymakers still have little guidance on how to design taxes. The main objective of this paper is to investigate the impact of the tax threshold in a sugar-based tax on welfare when firms engage or not in product reformulation. We develop a structural econometric model that incorporates consumers’ substitution patterns and firms’ price competition. Using household scanner data from the French dessert market, we show that the choice of the tax threshold strongly affects the share of taxed and reformulated products, the magnitude of the price increase, and welfare effects: the lower the tax threshold, the lower sugar consumption reduction, but the greater the reduction in consumer surplus and firms profit. Moreover, a tiered sugar-based tax reduces more sugar consumption when firms reformulate and allows for better targeting of the at-risk population.
Although we observe some reformulation effects due to the introduction of taxes (UK Government, 2018), the impact of a tax on product formulation is still neglected in the ex ante policy evaluation literature. In this paper, we develop a structural econometric demand and supply model that allows for both price and quality (or product formulation) responses to tax policy. Using the Kantar WorldPanel dataset on purchases of dairy desserts, combined with nutritional information from the Oqali dataset, we develop a marginal cost model that integrates all technological constraints in the production of dairy desserts. We extend the methodology of Barahona et al. (2023) by endogenizing product formulations on both the demand and supply sides
Policymakers have increasingly implemented nutritional taxes to influence consumer behavior toward healthier diets, with the efficiency of these taxes largely depending on their design. While theoretical and empirical literature suggests that taxes should be proportional to the harm caused, most nutritional taxes implemented to date, including sugar taxes, feature tiered rather than linear designs. This inconsistency between theory and practice raises the question: can tiered taxes be optimal, and if so, how should their key components be set? In this paper, we evaluate the performance of tiered sugar tax designs compared to the theoretically optimal linear tax. Using a welfare maximization framework, we account for externalities from excess sugar consumption, heterogeneous consumption patterns, and firms' strategic pricing behavior. Our findings reveal that tiered tax designs, when incorporating strategic responses from firms, can lead to significantly greater welfare improvements than the implemented Soft Drinks Industry Levy in the UK. Specifically, the optimal design features higher taxes on high-sugar products, prompting firms to reduce prices on lower-sugar alternatives. This adjustment not only enhances public health outcomes but also increases consumer surplus and preserves firm profitability. These results suggest that policymakers should carefully account for firms' strategic behavior when designing sugar taxation policies to maximize welfare benefits.